2-17-2009 – New Blog Post: Obama signs American Recovery and Reinvestment Act of 2009, $8,000 new home buyer tax credit is included; it’s not a loan.
UPDATE 2/12/2009: Economic Stimulus Plan – House and Senate drop the $15,000 tax credit for homebuyers; the revised plan limits the tax credit to $8,000 for first-time homebuyers that purchase a home before the August 31, 2009 deadline. The $8,000 tax credit is not a loan – Current price tag for the entire plan is $789 billion. (end update)
Senate Passes Economic Recovery Bill – will the $15,000 refundable tax credit for buying a new home be scaled back or eliminated during negotiations with the House on a final bill?
With three Republican supporters, the Senate passed President Obama’s economic recovery plan with a 61-37 vote. After trimming roughly $100 billion last Friday, the Senate bill will cost American taxpayers $838 billion; the House version of a similar plan would cost $820 billion. The next step for both the House and Senate versions of the bill is to create one final bill that pleases both parties, and have it ready for President Obama by this weekend so he can sign it into law.
Included in both plans is a tax credit for homebuyers, which is expected to cost taxpayers as much as $39 billion. The House bill allows for a $7,500 tax credit for first-time homebuyers and the Senate bill allows up to $15,000 in tax credits for all homebuyers. Opponents of the tax credit argue that it will do little to decrease high inventory levels because current homeowner’s would have to sell their current home to buy a new one. The Fix Housing First Organization is lobbying to keep the Senate provisions for the $15,000 tax credit, and to ensure that the credit remains available to the taxpayer as a tax refund and is not limited to first-time homebuyers. The organization states that first-time buyers make up only a small percentage of the total market and that including more buyers would enhance the success of the incentive. The Senate has a record of winning negotiations with the House, so the $15,000 refundable tax credit for all homebuyers has a good chance of staying in the final bill.
The major difference between the two bills in terms of jobs is that the Senate bill left out a school construction provision that will save or create 500,000 jobs; House Majority Leader Steny Hoyer said “The Senate bill costs more and creates a half a million less jobs”. Senator Susan M. Collins (R) of Maine gives her reason for excluding $60 billion for school construction spending, “I do not support the establishment of a new federal school construction program, because school construction traditionally has been a state and local responsibility”. I thought the goal was to create jobs, if $800 billion gets you 3-4 million jobs it seems like $60 billion for half a million more jobs is a bargain, but who wants to help states out, only 46 of them are facing severe fiscal problems.
Both versions (House and Senate) of the economic recovery plan include legislation for education and infrastructure improvements, tax cuts for lower-income wage earners and billions for unemployment benefits, food stamps, health care and other programs designed to help individuals during these harsh times. Side-by-side, 90% of the items in each bill are similar, the remaining 10% up for negotiation may stall progress and leave homebuyers, other consumers, banks and investors on the sidelines doing nothing, waiting for the information they need to move forward with financial decisions.
I bet the final Economic Stimulus bill ends up around $860 billion, what say you?
The good news is that after this plan gets passed, our economy will only be waiting on news about TARP II, the bad news is that creating plans is the easy part, implementing and regulating them has traditionally been the hard part. Crank up the money press and schedule overtime, after TARP II and this Economic Stimulus Plan become law, our government is could end up pumping more than $2.8 trillion into the economy. (20% of our nation’s current annual Gross Domestic Product). Is hyperinflation next?
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We have seen in some of the amended docs for the bill, that a minimum down payment of 5% is required for anyone to qualify for the new credit. Is that part of the final bill that was passed by the Senate on Feb. 10th ? and is there a no-refund clause ?
The reason I am asking this is because we are looking at a closing date of Feb 18th; which will be after the Presidents day (which would be the date of enactment if the President signs the bill that day) and we are doing an FHA loan with 3.5% minimum required down payment. With the current credit (although in the form of a loan) we are getting the whole $7500 check added to our EIC. But with the new bill (with a no-refund clause) we would be at a great loss here right when we get into our new Home.
Could someone with the latest info on the bill passed on Feb 10th please clarify this for us ? Thanks !
PK – The current version of the Senate’s bill does NOT have a down payment requirement.
It IS non-refundable, but has a provision to evenly split the $15K credit across two years. But that still means unless you have a tax liability of at least $7,500/year, you won’t get to take full advantage of the $15K tax credit.
There are also reports that in the compromise version of the bill, the $15K credit may be “scaled back”.
Jays last blog post..Phoenix Real Estate Guy Readers – Thank You, and Happy New Year!
@Jay – thanks for stopping by and addressing PK’s question.
I think they just killed this part of the bill:http://www.msnbc.msn.com/id/29136678
In this age of recession, they should put aside the question, “whose responsibility is it?” If there’s a way to generate 500,000 jobs, then just do it regardless if it’s a local responsibility.
Mike, looks like they did…thanks for the link, its got tons of good information. Truly a shame that the plan didn’t increase the incentive to buy a home. Maybe it’s better to just leave the market alone and get back to buying and selling homes without the interruptions. A $15,000 incentive would have been good for marketing though.
Construction in Orlando, Agreed, I’m for infrastructure improvements and job creation 100%.
Mike, Jay Thompson sent out a tweet with this link a couple hours ago
http://www.phoenixrealestateguy.com/15000-home-buyer-tax-credit-appears-dead-removed-from-compromised-version-of-stimulus-bill
Looks like there’s an $8,000 tax credit, that isn’t a loan, for first-time home buyers and an incentive for current homeowners. Up to $1,500 for making their home more energy efficient.
good post thanks for sharing.
People are saying that housing is the #1 cause of crisis but I don’t think that is true. Unrealistic economic expectations and beliefs are. The national debt doesn’t matter, the balance of payments can always be outgoing. Housing prices always rise and tax cuts are stimulus. So if the refinancing creates billions of dollars where does it go and where does it come from? It comes from existing investors and removing them would drive down the stock market again. It goes to largely to people who are the least in need of help and it doesn’t go to investment in the infrastructure. So it’s leverage is minimal.
Regards,
Michael McLaughlin, Cary real estate
Well, it will really help new home buyers a lot.
Regards, Jim,Calypso Resort Towers
I thought it’s better to just leave the market alone and get back to buying and selling homes without the interruptions.
The reason I am asking this is because the President signs the bill on 18th Feb and we are doing an FHA loan with 3.5% minimum required down payment.
Good idea is to just wait and watch.
Regards, Naveen, Samsung LN52A650
I thought it’s better to just leave the market alone and get back to buying and selling homes without the interruptions.The reason I am asking this is because the President signs the bill on 18th Feb and we are doing an FHA loan with 3.5% minimum required down payment.Good idea is to just wait and watch.
It is good for persons, who is in need of jobs. Both persons who needs jobs and the one who need to buy a home, will get benefitted.
Regards, MLM Leads
It sounds good.. Its good for both jobseekers and to real estate industry and also to people who need to buy a home, as they get tax credit..
Regards,
MLM Leads
Finally, some forms of economic stimulus seek to make investments that will pay off in the long run by making consumption cheaper for everybody. Lets hope for the best.
Cheers,Samuel (The guy into Real estate business in panama)
I am glad they continued this tax credit. A critical component of the recovering economy is the success of the housing market which took such a big hit last year. I think this will help!
Richard@How To Videos´s last blog ..Tax Refund Advance